Toronto Real Estate Predictions of 2014

As a kid I had an obsession about how the future was going to look in the year 2000, at which point I would be 30 years old. Young me saw myself as an old fart by that date, but life was going to be worry-free and dazzlingly different. There was a book at my primary school library that had a 3 month waiting list about what the future would look like in 10 years, then 20, then 30 years. It was intoxicating! According to my chosen literature, we should all be flying around in our Jetson-style cars. Work, as we know it, would all be done by robots while we sat around drinking Tab Cola, and we would be able to control the weather under our domed cities. As you can see, this book had less to do with realistic scientific advancements, and more to do with marketing books to the fantasy lives of 9 year old boys. I guess the big takeaway lesson here is to keep your predictions of the future a little more grounded in reality, and keep it to less than 30 years.

 Still,  I can't resist making a few of my own predictions for Toronto real estate in 2014. I don't believe we'll be flying around in our cars this year, but I do see some changes on the horizon.

So here is my thoughts on how 2014 will roll out in Toronto real estate:

1. PRICES WILL GO UP  Not everywhere. And not as much as in 2013.  Price appreciation will be neighbourhood specific, and the kind of property you buy will be key. Houses will rule supreme with continued bidding wars, especially in desirable and emerging neighbourhoods. Certain condos will also rise in price, but not by leaps and bounds. Some condos will sag in price or even level out. It's simple supply and demand. Very little supply of houses means more demand. Many more condos means less demand. The key with condos is to be in right neighbourhood and the right building.

2. IT'S THE YEAR OF RECKONING FOR NEW TORONTO CONDOS. The year the most Toronto condos were ever sold in pre-construction was 2011. Many of these are coming to market this year. There are closer to 20,000 units slated to be completed in 2014. So this will be the year to watch to see what happens with all of these condos. Can they be absorbed? I think so. And really, I find that new builds were too expensive compared to resale condos for many years now. So, it's about time that we are a bit more realistic about the price of new construction. Developers will continue to offer appealing incentives like free parking or lockers or a year of free maintenance fees to sweeten the deal without officially lowering the price of the condo while still lowering your purchasing costs. By 2016, the ample supply of units will begin to dwindle. So, those incentives won't stick around forever...

3. INVESTORS WILL LOOK TO GREENER PASTURES. When the financial crisis happened in 2008, it seemed that Canada was one of the very few countries that didn't have their real estate market crash. So, many folks from abroad who grew weary of the stock market and their own country's real estate market, came here to invest in real estate. Canada makes it relatively easy for foreign purchasers to invest in our country. So, foreign investment became a big deal in Canada. Nowadays, the deals are better in the U.S. cities where prices are starting to rebound after their huge slump. So, there will be far fewer investors and more buyers who actually live in the properties they purchase in 2014. This is a good thing. Though every condo has its fair share of owners who rent out their condo, it's good to have a healthy number of owners who live on the premises. They can participate on the condo board and be involved with the running of their building. It makes for a stronger board and well-maintained maintenance fees.

4. HOT HOODS OF 2014. In the east, the dismal portions of Leslieville's Gerrard will start to really take flight as businesses find the trendy Queen East sections too pricey and set up shop a few blocks away where the rents are much cheaper. Corktown will rise like a Phoenix with is excellent location, great urban planning and all the work for the Pan Am Games to be completed in the next year and a half. It's still a great place to invest and live. The Distillery will also benefit from all the PanAm Games preparations. In the West, the Junction and the Junction Triangle will continue to push up its cool factor even more as it moves from hippie outpost to hipster centre. In terms of downtown, the south core, in general, will become much more interesting than the north core of the city, as businesses and commercial demand shifts back from the suburbs with a stronger emphasis on the south city core. Cabbagetown's main street on Parliament will continue to improve particularly with the success of the Daniels condos that were once in the Regent Park area. With the continuation of this project, Cabbagetown will grow more solid as an established neighbourhood and Regent Park will shake its stigma after 50 years.

5. WHERE THE DEALS WILL BE. Emerging neighbourhoods will continue to be the best place for investment. In the west, I feel south Etobicoke is largely still undervalued, especially parts of Long Branch. Caledonia/Fairbanks and Weston are poised to be the next hot spots, but 2014 will only be the early stages of this. North of St, Clair in Oakwood-Vaughan, the success of Wychwood is starting to push into this neighbourhood with its massive houses. The east will have some deals in the Danforth Village, Woodbine-Lumsden and Crescentown, but, for the brave, the deals will be pushing into Scarborough. Pick your 'hood wisely here. Best Scarborough neighbourhoods border the old city of Toronto/East York or the lake, but you can find some great homes along the ravines or in areas like L'Amoreaux. Hamilton will continue to be your best investment out of the city with continuing price appreciations that made Toronto blush last year.

Okay, there you have it. My humble thoughts for the next year. Hopefully they will pan out a little better than the Future Predicting book of my youth.

READING THE TEA LEAVES: PREDICTIONS FOR TORONTO REAL ESTATE IN 2013

I can't help it. I get caught up in it like everyone else. As the new year begins, I want to stare into my tea leaves to see what kind of predictions I can make for 2013. There's just some thing about the start of a new year that really brings out the predictor is all of us.

Now remember, they're predictions, not guarantees. I'm making an educated guess, based on my experience and knowledge of real estate in this city. If someone says they absolutely, for sure, without a doubt, know where the real estate market is going, they're lying. Some know better than others. Some will be wrong and some will be right. Here's what I think:

1. THE TORONTO REAL ESTATE MARKET WILL BE VERY INCONSISTENT
What I mean by this: No property in Toronto can be treated as equal.  In 2012, this kind of inconsistent market was already well under way where houses and condos in this city did not sell the same way. In 2013, houses will be in limited supply, unlike condos. Houses will continue to be more in demand and make some modest increases. Some condos will slip in price. Other, well-located ones in distinct buildings or great emerging neighbourhoods will not.

2. STARTER HOMES RULE
I think starter homes, that is, houses that are in the grasp of a couple or a single buyer looking to purchase their first house will be the most in-demand property type. Again, limited supply, and a healthy group of hungry homebuyers who just don't want to buy a condo, will fuel this. This is why emerging neighbourhoods, like the Danforth Village for example, still perform very well. They have homes available in that sweet spot under 550K in the grasp of some first time home buyers.  More established neighbourhoods where houses run from 600K or more will not see quite the same performance. Why? Buyers who already own property are more likely to play the market. They will wait for the market to improve or change before listing their homes. Of course, like in 2008, if too many sellers try to play the market and fewer houses are listed, then less supply could means houses may go up in the established neighbourhoods as well.

3. CONDOS WILL NOT TANK
Sure, not all condos are created equal. Already in 2012, some condos have slipped in value in some areas. And there is a lot of concern about overbuilding and foreign investment. And these are very real and legitimate concerns. Since Canada doesn't really keep track of foreign investment, we don't know how may condo owners are end users who have some real investment in their property. And of course, we all look around us and see how many condos are going up. There's no denying it. It's very natural to ask: Who is going to live in all of these condos? Still, the condo market has really proven a necessary thing for the rental market. Condos have overwhelmingly supplied much needed rental units, and helped address the tight vacancy rate in this city. I'm sure many who bought condos to rent out in Toronto are as pleased as punch right now.

4. ANY REAL THREATS TO TORONTO REAL ESTATE WILL NOT BE SEEN IN 2013
I think what can truly put a damper on prices in real estate are interest rates. I don't think they are going to change much this year. The economy is improving, but I don't think, in the next year, it will improve so much that the government feels comfortable raising rates substantially. The other big killer is oversupply on the condo market. Again, hard to be sure about this one, but Tridel has recently put new units at Ten York on sale. Many real estate enthusiasts and investors watched this project closely.  Since the were able to sell 600 of the 650 units, it's a good indication that the market has not flatlined. Instead, it appears rather healthy. But don't think condos are on easy street. The number of condo sales have dropped 22% over the last year for resale, down 30% for new condos.

5. THE U.S. IS BACK!
In some ways, many American cities like Miami will pull away international investors from Toronto and give us a break from the buying frenzy we have seen here 2 years ago. It will certainly create a more balanced market. But there's a bigger silver lining here. That is, the improvement of the U.S. housing market will lead to more products and resources required from Canada, and in turn, a better economy. After all, they are still our biggest trading partner by a long shot.  And don't they deserve some real estate relief?  I know we can look on as pleased Canadians who didn't mess up our real estate market and banking system in the same way, but enough suffering already for our southern neighbour! Of course, it doesn't hurt that their economic upswing will help us too!